War Disruptions Threaten Q4 Earnings; Supply Chains May Take Months To Stabilise

A report by Emkay Research suggests that the current war between the United States and Iran will drag on corporate earnings during the fourth quarter of FY26, and the impact will be felt in the following quarter.

In the report, it was pointed out that the interruption of the supply chain by the conflict may require one to two months to stabilise, even after reopening the Strait of Hormuz.

It also observed that the destruction of energy infrastructure in the Middle East would slow down the normalisation of oil markets, increasing the difficulties of doing business.

How Will The Conflict Affect Earnings And Markets?

The report indicates that the total earnings effect on the Nifty is projected to be approximately 1-2% during FY27. Nevertheless, small and mid-cap firms will probably encounter relatively higher downgrades, but the pressure will probably be confined to one or two quarters.

The report also indicated that the level of impact of the conflict is yet to be fully taken into consideration in the market estimates. The Nifty and the overall market earnings forecasts are the same as at the end of March 2026, so the overall impact can still be seen in consecutive revisions.

World markets have displayed resilience despite the geopolitical tensions. While global markets have shown some improvement, crude oil prices have slumped sharply, with Brent crude falling by nearly 12%.

The movement comes after the United States decided to impose a halt on airstrikes on the energy infrastructure in Iran, as talks are in progress, and there is a chance of de-escalation.

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What Is The Outlook For Supply Chains And Recovery?

The report stated that supply chains are likely to take one to two months to normalise after the Strait of Hormuz reopens, suggesting a temporary but noticeable disruption in trade flows.

Despite the uncertainty, the probability of a peaceful resolution is assumed to be the base case. There are, however, conflicting signals with Iran denying any form of communication, even though US President Donald Trump said that there were positive signs in the negotiation.

In the case of India, a possible loosening of tensions may be a positive market trigger. The report alluded that the Nifty can experience a recovery following its recent drop of about 5% in the past three trading sessions.

Source:

ANI News